It is fair to say that last week’s budget was not exactly what businesses wanted or expected.
The reaction of the hair and barbering industry has been generally quite critical, but digging a little deeper, the effect of the budget is perhaps a little less disappointing than we first thought; let’s cover the key areas of impact with regard to apprentices.
Increases in NIC – Not applicable to apprentices under the age of 25
From April 2025, the employer share of the National Insurance Contribution (NIC) rises from 13.8% to 15% of the total earnings for most employees, a rise of 1.2 percentage points. It is fair to say that no business is happy about this increase; however, almost all apprentices employed in hairdressing are under the age of 25 which means businesses do not pay NIC on their wages. As a result, the increase in employer NIC is not likely to impact on apprenticeship wages.
National Minimum Wage
This is not the situation with the increases in National Minimum Wage (NMW) rates which will come into force from 1st April 2025. From then, the apprenticeship rate will rise from £6.40 to £7.55 per hour, an increase which has not been welcomed by many businesses.
Employment Allowance Increase
To help ease the burden of the higher NMW costs, the government has increased the Employment Allowance for small businesses quite considerably. In April 2025, the Allowance will rise from £5,000 to £10,500 and this will help shield all employers who had a NIC bill of under £100,000 in the previous tax year.
For larger employers not eligible for Employment Allowance support, and who are struggling with the increase in the apprenticeship minimum rate, there is another option available for keeping apprenticeship costs down, this is to reduce apprentice hours.
Reducing Hours
With careful planning and consultation, salons could consider reducing the number of hours an apprentice works.
For example, if an apprentice works 38 hours per week at the current apprentice rate of £6.40 per hour, their minimum weekly pay would be £243.20 per week. From 1st April 2025, the NMW will rise to £7.55, which, based on the 38 hours, will mean an additional weekly cost of 286.90 per week, a rise of £43.70 per week.
Reducing the apprentice’s hours to 34 hours per week (the equivalent of half a day less per week) would result in a weekly cost of £256.70, a rise of just £13.50 p/week.
Of course, when choosing this route, salon owners should consider the impact of reducing apprentice hours on client service. Also, an apprentice must work a minimum of 30 hours per week, otherwise their programme would need lengthening to meet government funding rules. Each business must choose their own way forward; however, we strongly recommend employers seek advice from an employment specialist on any changes you wish to consider introducing before making any decisions and taking any action.